Manchester’s co-working sector is expanding rapidly as the property sector looks to tap into the city’s booming startup economy. However, developers and landlords must recognise that building a sustainable coworking market is no easy feat, writes Grant Powell, chief executive of Central Working.
The traditional coworking model takes a “stack ‘em high” approach, born out of the last recession – low fees in return for a desk and internet connection. Many coworking providers survive month to month on wafer-thin margins, and a quick flurry of tenant exits can spell disaster.
The steady rise of Manchester’s commercial rents in recent years means that a quick lease deal and overnight Ikea fit-out no longer constitutes a viable business model. Moreover, the barebones offer simply doesn’t help startups to grow – coworking providers must offer something more than simple facility management.
Today’s businesses require more than office space. They need a nurturing environment, surrounded by people that understand their business and actively help them grow. This support is absent from the majority of co-working spaces, which sometimes rely too much on gimmicks like free beer and ping-pong tables to attract startups. These may be fun sites to work from in the short term, but savvy entrepreneurs understand that growing teams need more.
We are starting to see the rise of a new coworking model, one which helps grow members’ businesses by providing tailored support and forging valuable connections. This ranges from sourcing a cost-effective suppliers, introducing potential new hires or connecting with a partner to collaboratively pitch to a large client. Central Working launched one of Manchester’s first coworking sites on Deansgate back in 2014, and since then we’ve seen a host of providers spring up across the city. This is exciting for the city as competition drives change and means that the consumer wins.
This approach isn’t just posturing, it makes good business sense for today’s commercial property owners. On average, coworking sites maintain a higher density of people than traditional office space, providing a higher yield. Scaling companies can’t factor in per-square-foot rents on traditional leases, as they generally have to take more space than they need, proving costly in early growth stages when cash is key. This is why the traditional lease model is reducing in length year on year and the flexible sector is growing annually. Landlords searching for viable alternative options for their building are moving towards flexible working – but to maintain revenues, they’ll need to find providers who can attract customers and justify premium pricing.
I’d urge commercial owners to go the extra mile in evaluating any prospective coworking provider and hold them to account. Is the provider offering a growth service to the startup community, or are they just an extra layer of landlord?
Manchester is well on the way to becoming the UK’s second city for tech and startup growth. With this in mind, the city’s office sector must recognise that creating environments for growth, rather than offering real estate, is the future of commercial property. There is an opportunity for both landlords and providers to benefit from more collaborative, supportive environments with shorter, less restrictive leases. It’s a more attractive proposition to smaller businesses stay longer and expand within your site. That puts a big smile on the finance director’s face, but more importantly in my view, ensures that Manchester’s startup community continues to flourish.